Much ado about deregulation

Following the joint decision of the organized labour and 

the Federal Government on Monday, February 22, 2010,

to set up a committee to iron out the grey areas

of the much-touted deregulation of the downstream oil

sector, it is crystal clear now that the end of 

fuel price control system is just around the corner.

 

"subsidy provides incentives for smuggling into other

neighbouring countries where the prices are higher" 

Subsidy going...going...

The campaign to sensitize Nigerians on the need for

deregulation and the removal of petroleum subsidy is gathering

momentum at the moment. Almost every newspaper carries, on

daily basis, advertorial by a group which called itself

Movement for Economic Emancipation giving reasons why the subsidy

should go. This is necessary since several attempts by successive

governments  in the past to yank off the amenity have

met stiff opposition from the public, labour and opposition parties.

Benefits

From 2006 to 2009, about N2.5 trillion was said

to have been spent on subsidising petroleum products in

the country .This year, about N600 billion has been

projected as what fuel subsidy will consume. According to

the protagonists of deregulation, this amount could be spent

to fix the nation’s infrastructure problems such as irregular

power supply, bad roads, challenges in aviation sector, comatose

rail system and the broken down refineries. They further

argue that subsidy provides incentives for smuggling into other

neighbouring countries where the prices are higher .As a result,

fuel subsidy is not reaching intended beneficiaries. But the

antagonists would say that its removal would not translate

to a change in the status quo as deregulation would

only raise fuel price and worsen inflation in the country.

They fear that the money that would be saved would

only end up in private pockets rather than using it to

address the infrastructural challenges.

Fuel scarcity

Even without coming on stream of deregulation, Nigerians

have been paying more and are even getting accustomed

to buying fuel above the official pump price of N65 per litre

as a result of scarcity. Just last week, the Department

of Petroleum Resources (DPR) threatened to clamp down on

any filling stations selling fuel above the official rate.

But will this solve the problem? The answer is no.

The DPR official themselves know that if there is any fuel

crisis in the country, the price of fuel shoots up

and goes to the highest bidder.

Solution

Again, government has to address its dependence on imports

which is the root cause of the inadequate supply of the

commodity in the country. That is why many people

are clamouring for this deregulation. But I believe that the

solution still lies in fixing the nation’s refineries.